N.H.BHAGWATI - (1.) THE following Judgment of the court was delivered by
(2.) THIS appeal with special leave arises out of a judgment and order of the High court of Judicature at Bombay dated 23/09/1955, delivered in Income Tax Reference No. 19 of 1955 made by the Income-tax Appellate tribunal (hereinafter referred to as ' the tribunal ') to the Pligh court under s. 66(1) of the Indian Income-tax Act (XI of 1922)-(hereinafter referred to as ' the Act ') whereby the High court directed the tribunal to submit a supplementary statement of case on the points mentioned therein. The appellant is a limited liability company manufacturing textile goods at Bhavnagar which was an Indian State during the assessment years 1943-44 and 1944-45. For the said assessment years the appellant was held to be a non- resident, its years of account being calendar years 1942 and 1943. For the assessment years 1943-44 and 1944-45 (account years 1942, and 1943), the Income-tax Officer computed the British' Indian Income of the appellant on a proportionate basis under s. 4(1)(a) of the Act. In the account year 1942 its total sales amounted to Rs. 66,14,852.00 out of which sale proceeds amounting to Rs. 35,92,157.00 as detailed below were held by the Income-tax Officer to have been received in British India:- JUDGEMENT_1177_AIR(SC)_1959Html1.htm The Income-tax Officer computed the income of the appellant at Rs. 27,11,136.00 on a proportionate basis, i.e., proportionate to the sales in and outside British India. He held that the income amounting to Rs. 14,72,267.00 was received in British India under s. 4(1)(a) of the Act. There was no dispute in regard to the sale proceeds received through Trikainlal Mahasukhram. In respect of the assessment year 1944-45 corresponding to the account year 1943 the Income-tax Officer held that the sale proceeds amounting to Rs. 16,72,693.00 received by the appellant by cheques from the Supply Department of the government of India on British India Banks were taxable under s. 4(1)(a) of the Act. The figure of Rs. 16,72,693.00 according to the appellant, was a mistake for Rs. 12,97,631.00. The appellant had contended that the amounts had been received at Bhavanagar, by cheques drawn on banks in British India. The Revenue had not disputed the fact that the cheques had been actually received at Bhavnagarbut had contended that payments by cheques, though such cheques were received at Bhavnagar, were received in British India at the time and the place where the cheques were ultimately cashed and honoured by the banks on which the cheques were drawn and that until such encashment of the cheques, the monies could not be said to have been received by the appellant.
(3.) THE Appellant preferred appeals to the Appellate Assistant Commissioner, Ahmedabad Range, against this order of the Income-tax Officer for the said two assessment years. THE Appellate Assistant Commissioner by his two separate orders confirmed the orders of the Income-tax officer and held that the cheques were not legal tender and were not monies or monies worth as such and that the receipt of cheques at Bhavnagar was not receipt of money. THE receipt of money according to the Appellate,., Assistant Commissioner, took place on actual payments by the drawee Banks and he therefore held that the said amounts were taxable under s. 4(1)(a) of the Act. A further appeal was taken by the appellant. to the tribunal against the said orders of the Appellate Assistant Commissioner and the tribunal by its consolidated order for both the years, dated July 17/07/1952, held that the cheques for the said amounts of Rs. 2,58,987.00 and Rs. 13,08,987.00 in respect of the assessment year 1943-44, were received at Bhavnagar and that the sale proceeds were also received in Bhavnagar. The tribunal stated inter- alia as follows:There is no evidence that the cheques from government were received in Bhavnagar. It is not the Department's case that the assessee company has a registered office elsewhere. The presumption is that the letters containing the cheques were addressed to the assessee company at Bhawagar We therefore hold that the cheques were received from government at Bhavnagar and that the money was also received in Bhavnagar.' In doing so, the tribunal followed the Judgment of the Bombay High court in the case of Kirloskar Brothers Ltd. v. Commissioner of Income-tax Bombay (1). In view of the fact however that an appeal had been filed in this court against that decision of the Bombay High court the tribunal further stated:' We might point out that in case the Supreme court does not uphold the Bombay High court decision in Kirloskar case an enquiry will have to be made as to whether the assessee company's banks at Ahmedabad acted as the assessee company's agents for collecting the money due on the cheques.' In respect of the assessment year 1944-45, the tribunal, after directing the Income-tax Officer to verify the correctness of the figure of the amounts received by the appellant by cheques from the government (i. e., whether it was Rs. 12,97,631.00 as contended for by the appellant or Rs. 16,72,693.00 as held by the Income-tax Officer or any other figure), held that the cheques representing the said amount were received at Bhavnagar and the monies or sale proceeds were also received in Bhavnagar. The tribunal also held that another amount of Rs. 5,53,447.00 in respect of the said latter year, being the aggregate amount of the cheques received at Bhavnagar from other merchants was also received in Bhavnagar. ;